The second-largest telecoms provider in Indonesia, Indosat has a reputation for the avant-garde

Transparency clears path to progress
Deregulation of the telecommunications sector gave Indosat the opportunity to court foreign partners and create a modern network

Established in 1967 as a foreign investment company with a remit to provide international telecommunications services across Indonesia, PT Indosat Tbk (Indosat) is today the second-largest cellular and fixed wireless service provider in the country with over 20 million subscribers in both segments. A 54 per cent growth in net income in the first half of 2007, spurred by a surge in subscription of over 44 per cent over the same period in 2006, has placed Indosat at the forefront of the Indonesian telecoms market.

“Because we started as a privately owned company, at Indosat we have a private company culture,” asserts Johnny Swandi Sjam, the company’s president director. “This is one of Indosat’s strengths, as is the fact that our management team is predominantly Indonesian. This means we can develop our human capital through our own training programmes, which allow our employees to develop themselves. From an early stage in our company’s development we prepared people for competition and tried to get them out of the mindset of being a monopolist company. When the sector was deregulated, our employees were ready and able to cope with the changes in the market.”

A state-owned enterprise (SOE) from 1980, Indosat was listed on the Jakarta Stock Exchange in 1994, also becoming the first SOE to be listed overseas on the New York stock exchange.

“Our listing meant that we enjoy greater transparency,” continues Mr Sjam. “We have to disclose everything, for example we have to follow the Sarbanes Oxley Act. It makes the company more visible and ensures good corporate governance. It means that we maintain the standards of a world-class company.”

Johnny Swandi Sjam President Director, Indosat

In 2002, the government divested 41.94 per cent of its Indosat shares to Singapore Technologies Telemedia Pte in a 5.1 trillion rupiah deal, paving the way for the 2003 incorporation of Satelindo, IM3 and Bimagraha into Indosat, creating a full service network provider and consolidating the entirety of Indosat’s cellular, fixed and MIDI services into a single entity with a fully integrated network. In April of this year, Indosat held an initial public offering to issue Indosat Bonds V 2007 and Indosat Sukuk Ijarah (shar’iah) II 2007 in the national currency on both the conventional and shar’iah markets to fund the company’s ambitious expansion plans for 2007-2008. The 2 trillion rupiah issuance has been rated by Pefindo as idAA+ stable, with the bonds issued on the Surabaya Stock Exchange.

The first Indonesian company to offer BlackBerry and 3.5G services in the country, Indosat also pioneered HSPDA technology in addition to its core product line of international cellular and wireless networks, international long-distance, multimedia and data communications services and internet. The company also operates international roaming services in conjunction with GSM operators in Africa, Europe, the Americas and Asia, offering the service on 291 networks in 119 countries.

Last year, Indosat and FET of Taiwan, Hutchison Essar of India, Hutchison Telecom Hong Kong, KTF of Korea, NTT DoCoMo of Japan and Singapore’s StarHub formed the Asia-Pacific Mobile Alliance to promote voice, video and data roaming services to a combined subscriber base of around 100 million customers in eight countries. As well as enhanced roaming services, the alliance aims to integrate commercial customer support across the operational boundaries of the alliance.

Indosat is responsible for the total volume of international direct dialling business in Indonesia through its 001 and 008 long-distance services, and caters for commercial customers though its World Link and National Link leased line services, both of which have a base line speed of 64 kilobits per second, multipliable by 2 megabits and 45 megabits per second for narrowband and broadband connections respectively.

“At Indosat, we are always preparing for the next big change in technology,” concludes Mr Sjam. “In the mid-1990s we entered the cellular market because we believed that it would be the business of the future. This decade the cellular business is growing very quickly and we are in the thick of the competition. But as more companies join the market it becomes saturated and our position becomes difficult to maintain. Some people might think it is difficult to develop Internet services in Indonesia, but we are doing it all the same. Indosat is the first company to introduce this service and we are preparing the development of the infrastructure already. We are always thinking of the next curve for Indosat to develop our business through, and to keep our business growing.”